Labor

Elephant seals have got too big for their beaches. A large specimen might weigh over 8000 lbs (3700 kg).Their size has a simple evolutionary explanation. Large males fight for the right to mate with a whole beach full of females. For elephant seals it is, quite literally, winner-takes-all. And the key to winning is simple – size.

We have grown accustomed to regulating financial markets based on imagined, not real markets. Real markets are shaped by and co-evolve with institutional arrangements within two fundamental constraints: Imperfect knowledge and the threat of illiquidity.

The financial sector can support growth but it can also cause crisis. The present crisis has exposedgaps in economists’ understanding of this dual potential.

Many feel that due to its size and scale the financial system has become a burden on society rather than a servant to it. What are the key elements of a productive financial sector?

“Natural rate theory” has dominated interpretations of economic trends and policy prescriptions over many decades. European-type welfare state institution were claimed to cause a compressed wage distribution that distorts otherwise well functioning labor markets.

Inequality has been growing and destabilizing confidence in many countries in recent years.

Three major crises are confronting the world. The first is the increasing and uneven burden of humans on the biosphere, and the observation that we have already surpassed the ‘safe operating space’ for humanity with respect to three planetary boundaries: climate change, the nitrogen cycle and biodiversity loss.

In the last few years the impact of income distribution on macroeconomic dynamics has received growing academic attention.

How can we distribute growth globally when the developed world needs growth to emerge from debt overhangs and inequality between nations is still quite formidable?

Long periods of unequal incomes spur borrowing from the rich, increasing the risk of major economic crises

Higher income inequality in developed countries is associated with higher domestic and foreign indebtedness

Does greater inequality produce more fragile economic dynamics? Does concentration of wealth and income make societies more prone to crisis? If so, why?

Inequality did not increase during the early stages of economic development in Japan and the East Asian Tigers. But in India and China it did. Why is that?

This paper describes the broad evolution of inequality in the world economy over the past four decades, and provides a summary account of the relationship between inequality, economic development, political regimes and the functional distribution of income.